How to save for long-term goals

How to save for long-term goals

17 Dec, 2012

By: Uma Shashikant

Last week, I met an investor whose story holds a lesson for all of us. He is determined to give his child a better future even though he is a man of modest means.

He began to save 16 years ago, when his son was two years old, and has managed to put aside 30,000 a year. He decided to open a PPF account and also invested in an equity-linked saving scheme of a mutual fund. The fact that both the products also offered tax concessions helped.

He had been told that during the longterm time frame his money would grow at 16-17 % in equity, since this was the historical return. Meanwhile, the PPF was providing a stable 8%. He chose the growth option and did not take out any money from his investments.

His calculations showed that he would have about 20 lakh when his son was ready for higher education. However, he has ended up with less than half this amount. So, what went wrong?